Government cuts customs duties on 92 tariff lines for industrial inputs

The federal government has proposed a major tariff rationalisation package in the Budget 2026-27, reducing customs duties on industrial inputs, additional customs duties and regulatory duties across thousands of tariff lines under the National Tariff Policy 2025-30.

According to budget documents, customs duty rates will be reduced on 92 tariff lines covering input goods used by different industrial sectors.

Under the proposed changes, the existing customs duty of 20% will be reduced to 15% and 10%, while the current rates of 15% and 10% will be lowered to 10% and 5%, respectively. Customs duty currently charged at 5% will be abolished on selected tariff lines.

The government said the measures are aimed at lowering input costs and improving the competitiveness of domestic manufacturing industries.

The budget also proposes reductions in Additional Customs Duty (ACD). The ACD rate will be cut from 6% to 4% on 449 tariff lines, from 4% to 2% on 2,107 tariff lines, while the existing 2% ACD will be abolished on 569 tariff lines.

Regulatory duties have also been revised. All RD rates above 20% will be capped at 20% on 359 tariff lines, while RD rates between 2.5% and 20% will be reduced by 20% on 1,347 tariff lines. Lower RD rates of 2.5%, 2% and 1% will be reduced or abolished on 208 tariff lines.

The government has also reviewed the exemption regime under the Fifth Schedule of the Customs Act. Budget documents propose removing concessionary customs duty entries where the concessional rate is equal to or higher than the general tariff rate under the First Schedule.

Customs duty has also been exempted on critical cancer-related Active Pharmaceutical Ingredients (APIs), while duty on specialised construction-related vehicles has been reduced from 20% to 10%.

The budget also grants customs duty exemption on defence imports and provides complete exemption from Customs Duty, Additional Customs Duty and Regulatory Duty on imports of agricultural machinery to support farm mechanisation.

To facilitate trade and improve customs administration, the government has created 15 new Pakistan Customs Tariff (PCT) codes and amended descriptions of two existing PCT codes.

State warehouses authorised by Collectors of Customs have also been formally defined under the law, while legal cover has been provided for cargo scanning under the Customs Act to enable non-intrusive examination of imports and exports.